Departments will be told to assess whether outsourced service contracts worth upwards of £1m could be delivered more effectively in house, the Cabinet Office has announced.
Labour promised “the biggest wave of insourcing in a generation” ahead of winning the general election in 2024.
The new public interest test, part of a package of procurement reforms announced today, will cover more than 95% of central government contracts by value and “end outsourcing by default”, the Cabinet Office said.
Larger departments spending more than £100m a year on contracts will also be expected to publish an insourcing strategy setting out how they plan to bring services back in house in instances where it represents better value.
“For decades, previous governments have defaulted to outsourcing public services without properly asking whether they could be done better and more cost effectively by public sector workers,” the Cabinet Office said.
The reform follows a public procurement consultation the Cabinet Office carried out from June to September last year. In the consultation, the government said the test would “evaluate value for money, impact on service quality and economic and social value goals holistically”.
It said this would likely look at:
- Appropriate in-house capability
- Evidence of cost savings or service quality improvements
- Whether the service is core to the organisation’s objectives
- Need for greater control or accountability over the service
- Whether the service is a government created market
- Whether the existing contract/service is performing as expected.
The consultation said: “Where the public interest test suggests the service is a good candidate for insourcing, the contracting authority should then undertake a delivery model assessment in the usual way to decide the details of how best to deliver the service.”
Further procurement reforms announced by the government today include a requirement for departments to publish and report annually on a specific social value goal for all contracts valued over £5m, covering more than 90% of central government contracts by value.
On this change, the Cabinet Office said: “This government believes its spending should do more than buy a product or service. It should create jobs, build skills and strengthen communities. This is why community impact will now be placed at the heart of buying decisions, with companies encouraged to integrate national and regional schemes into their bids, creating local jobs and apprenticeships.”
The Cabinet Office also said a new suite of AI tools to streamline the commercial process has been developed, and that contract terms “will be simplified and additional business information will be integrated into a central platform, so that small businesses do not have to submit the same information twice when bidding for different contracts”.
In a further announcement, the Cabinet Office said shipbuilding, steel, AI and energy infrastructure will be recognised as critical for national security, with new guidance prioritising contracts for British business where necessary to protect national security.
The Cabinet Office said the guidance “will ensure the government does everything in its power to facilitate strong and sustainable industry in the UK”.
On today's reform announcements, Cabinet Office minister Chris Ward said: “This government is backing British businesses and the working people who power them. These reforms are about using the full weight of government spending to support British jobs, protect our national security and grow our economy.
“Whether you make steel in Scunthorpe, build ships on the Clyde or run a small tech firm in the Midlands, this government is on your side.”